Everyone Who Is Bullish Needs To Have An Answer To This Chart

The latest letter from GMO portfolio strategist James Montier
tries to explain the source of ultra-high corporate profits in
the midst of a mediocre recovery

You can read his letter
here. We summarize it
here, though the basic gist is that corporate profits are
being fueled by unusually large deficits.

The source of profits aside, the big lesson for investors is
summarized in the title, which is: What Goes Up Must Come
Down!

Indeed, Montier presents what on the surface appears to be one of
the bears' most compelling arguments, which is that no matter how
much the economy is recovering, or how cheap stocks seem to be,
margins are just ridiculously high now, and have to come down.